Indian Finance Minister P. Chidambaram gestures while he addresses a press conference after the Annual Conference of Chief Commissioners & Directors General of Excise and Customs in New Delhi on July 17, 2013. India will achieve its overall budgeted revenue target in the fiscal year to March, finance minister P Chidambaram said during the press conference. (Image credit: AFP/Getty Images via @daylife)
India?s Finance Minister Palaniappan Chidambaram said despite the tough outlook for government finances, and an election coming up, New Delhi has no plans to overspend to win the hearts and minds of the electorate.
On Thursday, the Economic Times reported on a Chidambaram presser on the first anniversary of his role as the country?s finance ministry where he said that state-run companies would be encouraged to raise funds overseas in new bond issues. He also said that the foreign direct investment policy would be liberalized beyond just big box retail and airlines currently as the government tries desperately to bring in money from abroad. ?Meanwhile, the FinMin did the usual cheerleading, saying he was confident the government could finance the current account deficit ? now nearly 5% ? this year without pulling money out of India?s foreign cash reserves.
India has $279 billion in foreign reserves as of July 19, according to the Reserve Bank of India.? Emerging market countries often use reserves to fend off speculative attacks against its currency, and to provide a cushion against external debt service.
The FinMin said that India?s target for this year?s fiscal deficit was still 4.8%. ?It is a red line and it will not be breached,? he said on a day that economic data out of the country showed the government had run up a fiscal deficit of nearly half the budgeted amount in the first quarter.
The fiscal deficit for April-June quarter was 48.4% of the budgeted amount compared with 37.1% in the same period last year, the ET reported Thursday.
Chidambaram had unveiled a new fiscal consolidation road map soon after taking over as finance minister last year and managed to contain fiscal deficit at 4.9% of GDP by effecting aggressive expenditure cuts, joining countries around the world trying to streamline government.
Investors have turned away from India this year, though. ?The Wisdom Tree India (EPI) exchange traded fund, one of the favorite ways into that market for the retail investor and day trader, is off 19.5% year to date, while the MSCI Emerging Markets Index is down 12.03%. ?Within the big four emerging markets, only Brazil equity is doing worse than India at the moment as investors gauge a mix of Indian policy paralysis and the worst government accounts in the BRICs.
In India, if all goes according to plans, the economy should grow between?5.5% and 6% this year, the Finance Minister said.
Source: http://www.forbes.com/sites/kenrapoza/2013/07/31/indias-finance-minister-vows-not-to-overspend/
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